Residential development "dead," commercial better

The Mexican housing market may be dead for would-be American buyers, but when they can sell their homes again and look south for retirement, a new option may be available: active retirement, assisted living and nursing home communities developed by Mexican hospital concerns.

That was the word yesterday at a panel discussion on Mexican development prospects, sponsored by the local chapter of the Urban Land Institute.

Participating were David Wiesley, vice president for multinational business development with Stewart Title Guaranty, and John McNeece III, a Luce Forward attorney specializing in corporate and international business.

“The resort and residential areas are dead right now in northern Baja,” said Wiesley. “You can’t get people across the border.”

He said border violence in Tijuana has subsided substantially in recent months as the Mexican government has cracked down on drug cartels.

But he said an additional problem is that would-be American buyers cannot sell their homes or tap their investments to purchase second homes across the border. Hotel developments also are hurting because tourism is down for some of the same reasons.

Any new development is on hold, as in the United States, because lenders have pulled back on financing projects and are coping with projects in default or foreclosure.

“It will be a long haul,” he said of one failed development. “There are a lot of disgruntled homeowners.”

However, he said, Mexican hospitals and other developers are looking beyond the current real estate slump. In time, aging American Baby Boomers will choose to invest in a “quality, safe” retirement community, where they can remain active, graduate to assisted living and end their lives in nursing care facilities. The cost would one one-third that of comparable communities in the U.S.

Favored locations are in the interior of Mexico, such as San Miguel de Allende and Morelia, which offer rich cultural attractions, such as libraries and universities -- and places close to airports, in case American ex-pats have to fly back home for specialized health services not available in Mexico.

“Between now and 10 years from now, there will be a boom in Mexico,” he predicted.

McNeece said American health care providers are currently not showing much interest in Mexico, fearing the huge liability problems they could face from their American patients. But providers might choose to set up Mexican companies with American nameplates that are not subject to American-style lawsuits.

Wiesley said the outlook for office development is “moderate,” citing one prime site in Mexico City that sold recent for $1,300 per square foot, several times the comparable cost in downtown San Diego. A 45-story tower by a Mexican bank is planned for the site.

Even stronger are industrial plants for automobile parts and aircraft manufacturing and the retail sector, evidenced by Home Depot and Wal-Mart’s expansion plans.

In addition, warehouse and distribution centers are still needed, particularly those to serve the Interstate 35 corridor between Dallas and Minneapolis.

As for Mexico’s security problems, the panelists said the government is determined to turn up the heat on narcotics syndicates and corrupt police forces.

“Little by little the government is setting the narcos back on their heels,” McNeece said.

But investors are worried that the narco-terrorists will turn to car bombs as a way to frighten the population and force the government to back off.